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VRA Investing Podcast – Kip Herriage – December 20, 2023

In today's episode, we provide an analysis of the day's market performance, and the potential for continued market gains, despite being at extremely overbought levels. Additionally, we cover insights into the themes and trends to ...

Posted On December 20, 2023Episode 1301
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About This Episode

In today's episode, Kip Herriage discusses the market's performance and the potential reasons behind today's selling pressure. He shares insights on the current state of the market, including the impact of the Federal Reserve's actions and the anatomy of a bull market.

Transcript

Don’t look back. The market is closed. Good. Wednesday afternoon, everyone Kip Herriage here with the daily VRA podcast. Hope you had a good day today,  a heads up. Tyler announced yesterday. This will be our final podcast for this week, and we’ll probably have one or two next week. It’ll be like our very letters beginning next week, be fairly intermittent, take some time off and the end of the year.

And anyway, we’ll continue. Always watch the markets. We just won’t have any podcasts again until at least sometime next week. So thank you again for listening. Odd day today. Very odd day today. Here we are, rocking and rolling this morning. Market advance continues.

And then here comes the selling pressure. It kind of started with FedEx news this morning. They warned about a slowing economy. Then all of a sudden, bond market started screaming, higher rates going lower, and then selling pressure just started picking up. I’ll just say that I’ve had this confirmed, Tyler, and I’ve double checked it and others are mentioning and talking about it. We had a 91.9% down volume day today for NYSE. That’s surprising. That stands out.

Talk about that a little bit. And again, it’s been such a strong December, really been a strong last two months. And talk about JPOW a little bit today. And the anatomy, JPow owed us one, didn’t he? Didn’t JPow owe us one from 2018 still? He still had a big marker to us and he delivered what’s been a great run provided by fuel from the Federal Reserve. And JPow becoming very dovish very quickly. Thank you, JPoW. And also maybe a little bit about the anatomy of a bull market because this is so early in this one. And to me it brings back 95 to 2000.

We’ve written and talked about this a lot, of course, in the big bribe that we expect this to be that move. And there were structural reasons for that. And it’s interesting as those structural reasons now they’re showing up in the news already, right? And it’s starting to build. It’s a very special time, as we said, for a long time. It’s a very special time to be an investor and a very special time to probably just be alive. I think some very cool things are coming. We’re excited about it. I think the markets are discounting that now.
Dow Jones today finishing down at pretty much the lowest today, down 475 points. That’s 1.3%. SPF hundred, down more than that, down almost 1.5%. We had like ten updates in a row coming into today. Rust 2000 today, after being up as much as I think I saw up 2%. No, I did. I take that back. I saw up 1% today.

But they’ve been on such a chair, and they went from a big gain today to down 1.9%. They led the way lower Nasdaq down one and a half percent today. And then outside of that, the semiconductors, which started acting a little weak yesterday, finished down 2.37% today. I’ll be, frankly very surprised if this is anything other than a short term shakeout, I’ll be very surprised that 91.1% downside volume on NYSE is an attention getter. But volume was light today. I should have thrown that in. Volume was like a total of 4.1 billion shares was light today. It’s that time of year, but still, it does get your attention.

But I’ll be very surprised if this amounts to much of anything. We’ve talked about the reasons why, ad nauseam, seasonality has been great all year. Guess what starts on Friday? Santa Claus rally. Last five trading days of the year, first two trading days of the new year. That technically is the Santa Claus rally. It doesn’t start till Friday. So again, a little shakeout today and tomorrow, maybe even if we were to finish a week on kind of a sour note, have a lower open on Monday. And that’s when you pounce, right? Because we still think seasonality is going to hold up.
It’s, again, held up all year. Investing is always about one thing.

At the end of the day, it’s supply and demand. I mean, it’s price action. Of course, that’s the bottom line, the thing that matters most. But it’s supply and demand that determines price action, and it’s all about liquidity. And you talk about the reasons, again, we’ve been talking about this here, six to $7 trillion still sitting in money market funds. Those folks felt really smart over the last several months, getting 5% on their money market and not so much now.

Not that they’re not still getting paid the money market nicely, but the market’s melting up. And so, again, these are conversations that are happening across America, both institutionally and for retail, where they’re like, we’re late to this party. Any pullback we’re buying. People are checking 401k statements. It’s happening everywhere. And you’re realizing they have too much cash and not enough in the market. And so, again, that demand is going to, as it has been doing and has been doing it, is overwhelming supply, which, of course, is what takes you to all time highs. And then, as Tyler loves to say, new highs.

We get new highs because no one that owns that investment has a loss. Not a single person has a loss. There’s no resistance. And so that’s really the basis of momentum investing, and that’s what this market is turning into. So I’ll be very surprised if this amounts to anything other than a short term sell off. I wrote it up this morning. This is that bull market. I really believe this is that bull market.

And this is not a new story from us. But we said it over a year ago. We’re saying the structural reasons for this market to go higher are clear and present, and they’ve been powering everything. First, the consumer we talk about. Again, I hate to be too repetitive, okay? I felt like I’ve done a lot of that in the last six months because these have been our macro themes, and we’ve been pounding the table on them because we felt so confident in them and they were right, and they just happened to be right. And we work hard at what we do, like you do. We work hard at what we do. And it’s rewarding to know that your thesis turned out to be accurate.

Right. But the thing is, this is a long term thesis for us. It’s a very long term thesis. Again, if this is anything like 95 to 2000, boy, I know that Playbook. I know a lot of you listening know that playbook, too. And it was a hell of a fun playbook with some scary shakeouts, okay? And then rocket ship moves, and there became a pattern to it. And, man, I got to tell you, we made a lot of money as financial advisors because we’re also trading our own accounts, right? I mean, that’s that market. You have to.

And of course, for our clients, ipos were everywhere. We were all getting. I took three companies public in that time frame. It was so easy to take companies public. It was just so much money. And look, as I talk about this, do you notice the difference between then and now? Just based on what I just said, you don’t have the public aggressively in this market. People aren’t telling those stories. Brokers aren’t trading their own accounts.

You’re not getting hot stock tips from your Uber or Lyft driver or taxi driver. That’s coming. People aren’t quitting their jobs in droves because this is what happened starting in about 98. In droves, people started quitting their jobs. And day trading. That meant the day trading offices exploded everywhere, right? This all happened in a compressed period. Of time. It was a crazy time.
But the other thing that happened was we had shakeouts that would test your metal, but they were all buying opportunities. Yeah. There were four declines of more than 10%, some quite a bit more, from 95 to 2004. Of them, you think, okay, the Nasdaq went up 584%. I think that’s right. I think I did it the other day. I think that’s exactly right. 584% in five years.
It was as sensational as it sounds. But we had four brutal short term shakeouts of more than 10% and one full on bear market of 31 or 32%, again in like three and a half, four months.

And that was late 86, just before the final massive leg higher that took the Nasdaq up a couple of hundred percent. So, yeah, it was a great trading market, but the signs of that are the signs that we believe are going to start. They’re already starting. It was a good economy. Then you’re seeing, we came out of 911, right? Came out of a recession, and then the Fed flooded the system of money. Sound familiar? And next thing you know, we’re rocketing higher.

I apologize. I was actually thinking about a chart of pressure mills and miners from 2003. Apologies. We’re talking about 95 to 2000. Those signs aren’t here yet. They’re not, but I think they’re coming, and that’s what we’re paying attention to. So again, bottom line, this is a pullback. We’d love to see it.
Maybe tomorrow. We want to buy small caps again, aggressively in our parabolic options program. And of course, we own them in the VRA portfolio. But we’re looking to make some more aggressive additions here as situation warrants. I’ll just mention, because I said it a minute ago, you look at this market, to me, in addition to the 95 to 2000 meltdown, this market reminds me from a precious metals point of view, since I just referenced the time frame from 2003 to 2008 and really then to 2011, like an eight year period that was broken up by the financial crisis crash from late 2007 to the bottom of March of three.

This reminds me of that, and I think that you’re going to see both the metals, the miners, and thirdly, the stock market rise in unison for some time. We showed a chart this morning to our folks, and you see an overlay of the miners versus SV 100. And it’s pretty much a parallel line.

Although the miners did outperform. That was the point. The miners did outperform during that move higher from 2003, 2008, and then after the crash, again, it was the best bull market that precious metals have had, and miners and I think we’re back into that setup again. Structurally speaking, it sounds very close. Okay, let’s look at the hood today. Again, these are not great readings today. Let me first get to the internals again. I repeat one more time.

91.9% down volume day for NYSE. I’m going to do a quick calculation here, quick refresh because this sometimes updates late. I want to make sure this is accurate. Yeah. 91.2% down volume day. That’s the final reading for NYSE. Nasdaq was better. Nasdaq was 78%.
For our advanced decline, we had about three and a half to one negative NYSE again, that’s more than I would have thought you’d have seen today. And just under three to one negative on Nasdaq for Vance decline. On the bright side, and this is much more normal. Again, strange readings today. New 52 highs and lows came in with 577 stocks hitting a new 52 week high. Just 134 hitting a new 52 week low. That is more of what you’d expect to see today in our sector watch today. Let’s see here.

All eleven sectors lower on the day led to the downside by consumer stables down 2%. Also, utilities down 2%. Consumer discretionary and financials also both down 1.7%. Again, nothing gaining today. Every sector lower. And a commodity watch, gold today down 955, announced at 2042. Silver up $0.11. That’s about a half a percent at 24 44.

Copper down 410% to 1% at 3.88 a pound. Crude oil pretty much flat on the day, down a dime right now at 73, 79. And finally, on the day, bitcoin is starting to surge again, probably right on queue. This should have a solid move higher again into q one of next year. I personally think on this move. Bitcoin takes out 100,000. That’s been our view for some time. We are aggressively long.

Bitcoin again today up eleven nine. That’s 2.6% at 43,602. All right, folks, a reminder again, it’s our last podcast for a few days. We’ll see you back intermittently next week and get gear up. What should be a remarkable 2024. I hope you all have a great holiday season here. We’ll see you again next week, but have a good weekend, and we’ll see you back next week. Thanks again for listening.

We’ll see you next time. Bye.

 

Podcast Newsletter

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Time Stamps

00:00 Intermittent podcasts, VRA updates, new website. Exciting!
04:01 Key themes for 2024: Fed, market conditions.
08:11 Market broadening with upward trends, hitting highs.
09:59 Record $7 trillion cash on sidelines inflows.
14:15 Bullish outlook for GDX and metals ETF.
16:44 Stay updated and see you soon after.

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